Slate Asset Management is launching a real estate fund that will invest in commercial properties that need a little tender loving care to regain their lustre.
The new private fund is called the Slate Canadian Real Estate Opportunities fund, according to sources close to the company, and its first acquisition is a $200-million portfolio of 12 office buildings in Calgary from Dream Office REIT. Toronto-based Dream disclosed the sale last week, but did not reveal the buyer.
In real estate circles, an "opportunistic" fund buys properties that need work such as renovations or new leases, fixes the buildings, then recovers its investment by selling or refinancing the real estate.
Slate is acquiring buildings from a Dream portfolio in Alberta that is 82-per-cent occupied, and landlords strive to have all their space filled, so the priority for the fund will be landing more tenants.
Toronto-based Slate is a private company, founded by brothers Blair and Brady Welch, which oversees $3.5-billion of real estate investments.
The 12-year-old firm has a reputation for contrarian investing that is reflected in the first investments by the new fund: Slate is buying in Alberta at a time when the commercial real estate market has been hard hit by the downturn in the oil and gas industry.
Slate manages two publicly traded REITs – one that owns office buildings and a second fund that invests in shopping malls.
Last August, the company launched a private fund, Slate European Real Estate LP, which acquired $174-million of shopping malls in Germany.
The new Canadian venture is Slate's second private fund and it has a mandate to invest in commercial properties across the country.
The fund is backed by institutional investors such as pension plans and insurance companies and Slate recently held a first close on the fund, according to sources close to the company. Slate declined comment on details such as the target size of the new fund, but sources said it will be a "significant" real estate venture.